States in pitch to Victorian business hurt by ‘horror’ Andrews budget: ‘come to us’

Victoria has been warned its high-taxing budget will see businesses flee to other jurisdictions, some of which are actively urging firms to relocate to enjoy lower tax and a more pro-business environment.

Tasmanian Premier Jeremy Rockliff wants to lure disgruntled Victorian businesses to his state with the promise of lower taxes and a better investment enviornment. Picture: Nikki Davis-Jones

Some of the nation’s leading businesses have warned Victoria’s high-taxing budget will spark a jobs exodus, as other jurisdictions openly court firms to relocate, promising lower tax rates and a more pro-business environment.

Tasmania’s Liberal government was the first to seize on hikes to payroll and land tax in the Victorian budget on Tuesday, urging Victorian-based companies to contact its coordinator general to negotiate relocations.

“Lower taxes, cheaper power and a state that backs small business,” Tasmanian Premier Jeremy Rockliff tweeted, on the eve of his own state budget.

“If any Victorian businesses want a better deal, to provide jobs and opportunity to Tasmanians, we’ll welcome you with open arms.”

Labor jurisdictions were more circumspect but also pitched their tax regimes as significantly more competitive and urged Victorian-based firms to consider a move.

Some senior business figures warned Victoria would lose business as a result.

Melbourne businessman Geoff Harris, co-founder of Flight Centre and The Australian 250 rich lister, said: “I think if you are a national company and looking at growing in Victoria or another state, all things being equal, why would you invest in Victoria?

“Bringing in this higher payroll tax …makes Victoria a less-­attractive place to invest, for both Victorian businesses and also overseas business coming in and making Victoria a place where the cost of doing business is so far higher.

“I think the state government should get their own house in order before raising taxes. I think it will put dampener on investment in Victoria for new growth and places further costs on doing business.”

ANZ, one of Victoria’s largest employers, with about 19,000 Victorian staff, expressed concern. “This decision places large Victorian employers at a competitive disadvantage to their Sydney and Brisbane based counterparts,” said an ANZ spokesman.

“It is at odds with the work we are all trying to do to get Melbourne back on its feet.”

Angus McKay, chief executive of the nation’s largest convenience store chain 7-Eleven, headquartered in Victoria, said the lift in ­payroll taxes was an “appalling” disincentive to invest in Victoria.

“This will make it harder for companies to do business in Victoria,” Mr McKay said.

“I think it‘s terrible, someone should rethink it.

“It’s not just about helping small business, I get that, but also they should be thinking about medium and large business too. We are proudly a Victorian business, and for those Victorian businesses why would they stay here?”

David Jones chief executive Scott Fyfe also warned that “cost of doing business” hikes would ­“impact consumer confidence and put pressure on costs across in the retail market”.

Victorian Premier Daniel ­Andrews, however, insisted there would be no exodus of business as a result of the tax changes, which would lead to the biggest city-based firms paying the highest payroll tax rate of any state.

“The budget papers forecast the economy getting bigger, not smaller, so I think that that is as clear as you can be that Victoria is going to continue to go from strength to strength,” Mr Andrews said.

He argued Victoria would be worse off if it failed to raise revenue to pay off Covid-related expenditure that would see total net debt rise to $171.4bn by 2026-27.

“What will compromise our future, what will make that growth incredibly challenging, and what will make it challenging for the government to continue delivering health services, education… is if we don’t pay that Covid credit card off,” Mr Andrews said. “That’s exactly what we are doing … That (Covid-related expenditure) money is gone, and it had to be spent then. It has to be paid back now.”

NSW Treasurer Daniel Mookhey said he wanted to poach businesses from Victoria, and other jurisdictions. “I want Queensland businesses, Victorian businesses, West Australian businesses and international businesses to come to NSW,” Mr Mookhey said.

Northern Territory Treasurer Eva Lawler said her jurisdiction was “the best place to invest and do business”. “Not only are we strategically located to our Asia counterparts but we also boast below-average taxation – including no land tax and a high tax-free threshold for payroll tax,” she said.

The Victorian budget lowers payroll tax for some small business, by increasing the threshold at which the tax kicks in from $700,000 to $900,000 from July 2024 and to $1m from July 2025.

Once reached, those firms will pay 4.85pc payroll tax if in metro areas or 1.21pc if in regional areas. A further measure will better target the benefits of the tax-free threshold to small businesses.

However, the largest metropolitan-based firms face significant increases. From July 1, those with national payrolls above $10m a year will ‘temporarily’ pay an extra 0.5pc, while those with wages bills above $100m face a further 0.5pc.

That means firms with $10m-plus payrolls will be paying 5.85pc payroll tax and those above $100m will pay 6.85pc. These figures include a previously imposed “mental health and wellbeing surcharge”.

The Victorian budget’s increased thresholds for smaller businesses still fall short of more generous thresholds interstate, with the ACT having a $2m a year threshold, the NT and South Australia $1.5m, Queensland $1.3m, NSW $1.2m, and Tasmania $1.25m.

Top payroll tax rates in other jurisdictions are: Western Australia 6.5 per cent (above $1.5bn), Tasmania 6.1 per cent (above $2m); the ACT 6.85 per cent (above $2m); Queensland 5.7 per cent (above $100m); the NT 5.5 per cent (above $1.5m); South Australia 4.95 per cent (above $1.7m) and NSW 5.45 per cent (above $1.2m).